Different theories have been developed by various seminal thinkers to underlie and explain the operations, performance, success and failure of companies engaged in manufacturing across the globe. One of these protagonist theories is the emerging theory of manufacturing by Peter F. Drucker (1990).
In his seminal writing on manufacturing, Drucker (1990) proposed the establishment of a new manufacturing system called the postmodern factory of 1999. The essence of this postmodern factory, Drucker (1990) believed, would not be mechanical, although it would involve the use of several machines. Rather, this new manufacturing system would be conceptual in nature and pivoted around four significant concepts. These include statistical quality control (SQC), management accounting, flotilla concept of flexible manufacturing and systems concept. Drucker (1990) believed, collectively, these concepts would constitute the new approach to manufacturing.
He averred, social organisation of factories is witnessing significant transformation through statistical quality control while production decisions are transformed to business decisions owing to the introduction of new accounting in manufacturing. The flotilla concept allows for the organisation of the manufacturing process to maximise the advantages of standardisation and flexibility; while the systems approach enhances the physical process of transforming materials into economic value, or creating value for the organisation.
The evolution and development of these concepts affect our thinking and management of manufacturing in contemporary periods; they affirm the need for a new manufacturing theory. Drucker (1990) noted the old paradigm of patching up old theories as innovative ways of advancing improvements in manufacturing only retards economic progress; it subtracts from the economic value likely to be created through and by manufacturing.
In manufacturing domain, statistical quality control refers to “rigorous, scientific method of identifying the quality and productivity that can be expected from a given production process in its current form so that control of both attributes can be built into the process itself” (Drucker, 1990, para. 6). Further, statistical quality control helps in immediate detection of malfunctions and indication of where they occur. Examples of malfunctions include overheating furnace, worn tool, and dirty spray gun.
Statistical quality control could rely on a small sample to detect the malfunctions. As a result, malfunctions are reported immediately; and this allows machine operators to resolve operation anomalies in real time. Also, the effect of any change on the performance of the entire process is quickly detected by the statistical quality control. Finally, statistical quality control allows manufacturing managers to identify where; and most often how continuous improvements in the quality and productivity of the whole manufacturing process could be assured. This process has evolved in names including the Shewhart Cycle, Deming Cycle, and Kaizen. The latter is the Japanese term for continuous improvement (Drucker, 1990, para. 6).
The Theorist believed the foregoing engineering features only provide partial explanations for the results likely to be achieved from statistical quality control. However, the features do not explain the productivity gap likely to exist between manufacturing companies incorporated and operating in separate jurisdictions with varying degrees of social values. Effective adaption and implementation of statistical quality control concepts leads to social transformation; and significant improvements in productivity gains.
The statistical quality control concept swings the manufacturing pendulum in favour of machine operators; it supports increasing number of machine operators; and less number of non-operators such as inspectors, fire fighters, and repair crews, among others. This concept (SQC) affirms the need for machine operators to be in control of their work; and make such control almost mandatory because constant feedback from statistical quality control could best be provided by machine operators with the hands-on knowledge and experience on the job. For over a century, manufacturing was dominated by two fundamental approaches: the engineering approach or scientific management theory by Frederick Winslow Taylor; and human resources or human relations approach propounded before World War I by Andrew Canergie, Julius Rosenwald and Hugo Münsterberg.
These traditional approaches perceive the factory as a “collection of individual machines and individual operations” (Drucker, 1990, para. 56). Although these fundamental approaches have always been considered mutually exclusive, they are not mutually exclusive in statistical quality control; they combine to provide the needed results. It is worth noting, Drucker (1990) admitted SQC is not a new concept; it was initially formulated by Sir Ronald Fisher after it had been originally designed by Walter Shewhart, the laboratory physicist. However, the versions used today were separately developed during World War II by W. Edwards Deming and Joseph Duran; and improving on its application would be essential to increasing productivity in manufacturing.
Drucker (1990) predicted full realisation of the new manufacturing system concept is years away. However, the new system would require very different managers and management to assure its effective implementation and success. To achieve stated and desired objectives, companies would have to consider adopting the Japanese corporate strategy. That is, the “custom of starting all new management people in the plant and in manufacturing jobs for the first few years of their careers” (para. 52). He believed businesses could even “go further and require managers throughout the company to rotate into factory assignments throughout their careers-just as army officers return regularly to troop duty” (para. 52).
Importantly, companies such as Caterpillar have already begun to extend the manufacturing systems concept beyond the plant into the market place by supplying and replacing parts across the world within 48 hours. Although the initiatives of organisations such as Caterpillar are an exception, Drucker (1990) believed they must be the rule or norm. That is, manufacturing must not end when goods are shipped from the factory; physical distribution and product servicing should constitute an integral part of the manufacturing process. To this end, the term manufacturing in the emerging theory is defined by Drucker (1990) as the process of converting materials into economic satisfactions.
In the factory of 1999, Drucker (1990) perceived manufacturing as the integrator that harnesses all activities in the company: manufacturing plays a pivotal role in the creation of economic value that eventually pays everybody and for everything in the workplace. Due to the foregoing, Drucker (1990) noted the greatest impact of the new manufacturing system would not be on the process of production. Rather, its greatest impact would be analogous with that of the statistical quality control. That is, emphasis would be on human and social concerns. This implies the new manufacturing system would seek to transform functional managers into business managers; each manager would be assigned a specific role, but they would all remain members of the same cast and production.
Drucker (1990) believed management of manufacturing companies of tomorrow would not be left to lawyers, financial executives and marketers with little or no experience in manufacturing. Rather, to ensure efficiency and higher productivity, businesses would vest day-to-day management of their operations into the hands of professionals who understand and appreciate the dynamics of manufacturing. This would affirm the economic usefulness of the new manufacturing systems concept. He identified some significant differences among the four concepts that underlie the emerging theory of manufacturing. He noted in statistical quality control, the phrase, the factory, is defined as a place where people converge to work.
Similarly, in management accounting and the flotilla flexible manufacturing concept, the factory is described as place where work is ongoing or being done; whether the work is done by robots, individuals or animals does not really matter. However, in the new manufacturing systems concept, “the factory is not a place at all; it is a stage in a process that adds economic value to materials” (para. 54); factory design transcends theoretical and semantic imaginations to include “immediate practical consequences on plant design, location, and size; on what activities are to be brought together in one manufacturing complex; even on how much and in what to invest” (para. 54).
The theorist believed each of the foregoing concepts epitomises a mind-set. For instance, the application of statistical quality control does not require thinking; it requires an action or practical illustrations; management accounting lays emphasis on technical analysis; work flow and organisation design are the main stay of the flotilla concept of flexible manufacturing; and the systems concept has the tendency to keep managers thinking “and never get to the doing” (para. 55). Drucker (1990) believed each of the identified concepts has its peculiar language, tools, and addresses different categories of persons.
In spite of their noted differences, the four concepts of the emerging theory of manufacturing have a converging point; they have common ground. Drucker (1990) argued, the entire process of manufacturing is a configuration; and the whole is far greater than the sum of its adjoining parts. The parts are susceptible to underperformance. However, the entire process could produce positive results. Drucker (1990) argued, the emerging theory of manufacturing holds premium over Frederick Winslow Taylor’s engineering approach or scientific management theory which emphasises on partition of each work into individual operations; and the “Modern” twentieth century concepts which focuses on assembly line and cost accounting; and defines performance to include the sum of lowest costs of operations.
Under the emerging theory of manufacturing, every manufacturing manager is expected to “learn and practice a discipline that integrates engineering, management of people, and business economics into the manufacturing process” (para. 57). Although some manufacturing managers are already practicing this new and important management technique, they may not be aware of its implementation; and thus, not systematised to facilitate its teaching in business and engineering schools.
Drucker (1990) concluded statistical quality control, management accounting, flotilla of flexibility of manufacturing and the systems concept are synergistic in nature; they collectively, but not individually, address issues saddled with traditional and twentieth century mass-production plants. These include conflicts between functions and systems, standardisation and flexibility, time and money; and people and machines, among others. Each of the foregoing concepts defines manufacturing to include the physical process that adds economic value to assembled materials; and defines performance as measures put in place by management to ensure increased productivity and output. Although each concept attempts to provide economic value in a distinct way, they share a common manufacturing theory.
Development of Agribusiness and Agricultural Sector – Policies and Strategies
Ghutidze (2017) examined measures that could be put in place to effectively promote agribusiness insurance to accelerate contribution of the agricultural sector to rapid development and growth of the Georgian economy. Ghutidze (2017) noted, Georgia is an agricultural-led economy. However, the economy’s food potentials are partially harnessed and developed. Thus, efforts at implementing and strengthening existing structures and schemes such as the agricultural insurance system to facilitate the evolution and development of agricultural activities require immediate attention and support of all stakeholders.
Findings from Ghutidze’s (2017) research identified specific risk factors such as drought and lack of adequate financial resources as the main challenges to effective development of agribusiness and the agricultural sector in Georgia. Natural disasters including drought are not insured by the agricultural insurance system in Georgia. The findings revealed drought is observed throughout the country; and in early years, it was recorded once every 15 to 20 years. However, in recent periods, drought is recorded once every 6 to 7 years; and cause significant damage to crops across the country. To this end, Ghutidze (2017) believed natural disasters such as drought deserve utmost attention of the Georgian government.
To address the foregoing challenges, the Georgian Ministry of Agriculture developed an agricultural insurance project to facilitate and support the adaption and implementation of agricultural insurance in the country. The research outcomes revealed challenges to effective performance of the insurance sub-sector have trickle-down effect on other sectors such as employment, agricultural sector; and the economy as a whole. Thus, efforts by the Georgian government to address challenges saddled with the insurance sub-sector would immeasurably help to heal the “wounds” of the Georgian economy in general.
Based on the research findings, Ghutidze (2017) made recommendations that would eliminate obstacles and assure effective development of agricultural insurance in the Georgian economy. Notable among these include the need for the Georgian government to engender national discussion on the European Union’s risk management system on agriculture to determine its suitability for the Georgian economy. Similarly, it is imperative to review European Union’s existing regulations on solvency; and introduce measures that would stimulate and increase enrolment rate in agribusiness insurance among Georgian farmers. Ghutidze (2017) urged insurance companies to intensify their marketing drive to complement government’s efforts at increasing awareness on agro insurance among the farming population. Insurance companies must conduct market research to identify the insurance needs of farmers, so they could diversify and increase their product types.
Pagria, Musabelliu and Pipero (n.d.) assessed the role of management in the performance of agribusinesses. The researchers sought to examine the effect of prevailing and potential governance structures such as internal governance, hybrid governance and market governance on the performance of companies in the agribusiness industry. Pagria et al. (n.d.) identified three significant strategies, namely vertical integration strategy, horizontal integration strategy; and a third which was less emphasised, but very significant. That is, concentric diversification strategy.
Findings emanating from the study revealed a positive relationship between growth strategies and governance structure of companies; the two variables have significant effect on cost reduction and profitability increase, vice versa. An organisation with sound growth strategy is able to mitigate production cost while stabilising and increasing profit levels. The performance of large agribusiness organisations is dependent on the effectiveness of their growth strategies, which are derived from the governance structure. The implementation of a successful growth strategy is contingent on detail analysis and evaluation of the implied company. This must be done in consonance with the framework undergirding the totality of internal and external factors that inform the production process and its completion.
Dale and Currie (2015) evaluated methods that could be adapted and implemented as alternative ways of funding research in the area of agribusiness in the Canadian economy. The research findings revealed government funding for agricultural research in Canada is high due to factors such as low commodity prices. The Canadian Controlled Private Corporations provide research funding through matching grants, tax credits and investments, to agribusinesses and farmers.
The researchers illustrated alternative investment models that could help private organsations and interest groups raise funds to finance agricultural research in addition to tax credits and matching grants. For a research cost of $1 million, an agribusiness would need $181,400 after receiving tax credits and matching grants of 50%. Dale and Currie (2015) found private capital investment as viable source of raising the differential; with only an initial investment in the capital markets using options strategy, the investing firm could generate between 30% and 60% each year. This is economical and less demanding, financially, compared with the traditional investment method where an organisation would need to hold over $6 million at an interest rate of say, 3% to provide the necessary funding annually.
Risk associated with the proposed alternative investment model is considered low; returns on investments are earned during upward and downward turns in the capital markets. The Canadian government’s commitment to funding research is very high. However, Dale and Currie (2015) believed agribusinesses’ resolve to seek innovative and cost-efficient ways to finance research in the industry would complement government’s efforts; and enhance the level of research in the agricultural sector of the Canadian economy. Findings from the research affirmed high development standards in the establishment of agricultural insurance in Canada; and corroborated Čolović and Petrović (2014) who found Canada and the United States of America as the joint leading economies with the highest agricultural insurance premium rates (55%) between 2005 and 2014.
Ntiamoah, Li and Kwamega (2016) drew on regression and correlation statistical models to assess the effect of government and other government institutions’ support on the general performance of small- and medium-scale enterprises (SMEs) engaged in agribusiness in Ghana. Ntiamoah et al. (2016) sought to test whether the support from government has a positive effect on the performance of SMEs; whether the support from other government institutions has a direct effect on the performance of SMEs; and whether the support from other government institutions plays a significant mediating role in the relationship between support from government and performance of SMEs in Ghana.
The researchers relied on primary source of data collection in the study. In all, six hundred (600) questionnaires were administered to respondents while five hundred and forty-five (545) were retrieved. Selection of respondents for the study was based on a simple random sampling technique. Findings from the research revealed a strong relationship among supports from government, other institutions and performance of SMEs.
Based on the research outcomes, Ntiamoah et al. concluded, increased productivity of SMEs would be assured through increased government and other institutions’ supports. Findings emanating from the research related strongly to Dale and Currie (2015) who found a combination of government and private agribusinesses’ research funding as very essential to the development of agribusiness and the agricultural sector; and to the development of the Canadian economy as a whole.
Merung, Darmawan, Windia and Astiti (2019) relied on the analytical network process (ANP) model to assess how Indonesian youths could be empowered to become pragmatic entrepreneurs in agribusiness. Merung et al. (2019) adapted the social capital-based business model canvas (SCBMC) to examine the value of products offered to customers. Indonesia is an agrarian economy. As a result, Merung et al. were interested in identifying strategic ways of developing youth entrepreneurship in agribusiness to help reduce Indonesia’s dependence on other economies.
Indonesia’s role as an agrarian economy implies the availability of sufficient raw materials to serve as job opportunities for the youth in agribusiness. The youth’s involvement in agribusiness became a common place following the Indonesian economic crisis in 1998. The authors noted the Indonesian economy was in a state of disruption. That is, only those with competitive heart and spirit could survive in the business environment; the business race is not for the faint-hearted.
Merung et al. developed a joint ANP-SCBMC model to select the best priority empowerment strategy from three alternatives including Preserves, Creates and Delivers which are interrelated. All elements and clusters used in the research were placed in a single window; no sub-networks were created for this purpose. A model stability analysis was conducted by the researchers to ascertain stability of the results obtained from the ANP-SCBMC model. Similarly, sensibility analysis and cluster comparisons were carried out by Merung et al.
Findings from the research indicated social capital (SC) alone is more significant in influencing alternative empowerment strategies than when combined with the business model canvas (BMC). However, the highest significance is obtained when the ANP-SCBMC model is applied. The research outcomes revealed the following order of importance for the alternative empowerment strategies: creates, delivers and preserves. Merung et al.’s study provides a strong footing for inculcating entrepreneurial mind-set in the youth; it helps to nurture young graduates to become job providers other than job seekers.
An empirical research conducted by Junais, Samsuar, Useng, Ali and Syarif (2019) sought to examine how socio-spatial approach could be integrated into land use planning for agribusiness products in underdeveloped districts in Indonesia. Consistent with Merung et al., Junais et al. (2019) affirmed Indonesians’ strong reliance on agriculture as the major source of income and livelihood. Junais et al. noted imbalance in the practical implementation of agricultural policies in Indonesia due to little attention to space and time; while cultural, social, policy, networks, infrastructure and economic factors attract the needed attention from stakeholders. Junais et al. carried out land feasibility exercise using the Food and Agricultural Organisation’s Land Suitability Evaluation model to determine suitability of the soil for cultivating agribusiness products.
Findings from the research revealed potentials of the underdeveloped districts for agricultural activities in the country. However, lack of clear planning on the part of government in relation to effective utilisation of land is a challenge to effective development of the agricultural sector. The findings revealed twelve (12) agricultural products are cultivable in the research area. However, only six (6) commodities, including potatoes, leeks, celery, coffee, onions, and chili were socially acceptable for agribusiness in the area. Based on the study outcomes, Junais et al. emphasised the need for the Indonesian government to direct land use to facilitate cultivation of valuable crops to stimulate competitiveness of agribusinesses.
Ghutidze (2017) identified wrong assessment of risk and weak financial management as critical factors affecting the level of capitlisation and investments in the insurance industry in Georgia. This affirms the arduous task of insurance companies and the government. It is believed steps taken by the government to set high education and promotion standards; and to ensure only individuals with high level of expertise in actuarial and insurance activities are licensed would help improve on the levels of investment and performance of the insurance industry.
Moreover, efforts by insurance companies to improve on communication, co-ordination, weak corporate management standards; and retrain staff at regular intervals to enhance their hands-on experience and knowledge would contribute meaningfully to efforts aimed at improving on the low capitalisation rate prevailing in the insurance industry. The long-term success of agro insurance businesses is negatively impacted by weak corporate management structures and standards. Qualitatively, insurance companies lose money and time through increased administrative and acquisition costs; and reduced sales revenues. Lack of proper co-ordination is a major contributor to the foregoing operational and performance defects.
Dale and Currie (2015) urged small agricultural companies to transition from the cash flow basis of funding research to investment proceeds basis. The latter approach calls for reliance on returns from initial investments as the fundamental source of funding agricultural research. This would minimise pressures on the companies’ finances; and assure uninterrupted funding for future research. Thus, a paradigm shift from annual cash infusion to strategic investment initiatives holds the key to successful research funding in the agricultural industry. Corroboratively, Merung et al. identified capital injection, development of business infrastructure, training to improve competencies; and social innovation of human resources as major prerequisites for successful implementation of business models among young entrepreneurs.
An organisation’s inability to maintain complete communication methods and systems at both vertical and horizontal levels is likely to be saddled with information exchange challenges. These challenges may affect the accounting costs of specific policy formulation; and operating cost in general. Similarly, the level of academic and professional education of management and operating staff has an effect on the overall performance of any given organisation.
Ghutidze (2017) found the general levels of academic and professional qualifications of personnel in the Georgian insurance sub-sector to be low. To assure long-term success of companies in the insurance sub-sector, it is imperative for these companies to consider investment in their human capital as paramount in the immediate-, medium- and long-term. The researcher found growth in well-developed agricultural insurance and penetration rates to be a product of high government involvement in sector-by-sector policy formulation and implementation; product of government’s high involvement in the development of institutions and risk assessments; and product of government’s promotion of extension methods and services in a transparent manner.
Extant research revealed Spain has the most sophisticated and advanced agricultural insurance system in Europe. Ghutidze (2017) noted, agricultural insurance premium in Spain is subsidised; regional and central governments absorb 60% and 20% of the respective insurance premium cost. Spain’s agricultural insurance system is built, based on institutional agreement between the Spanish government and the private sector. And as key stakeholders, the farmers’ unions play an active role in the implementation of the insurance scheme. The rate of agricultural insurance subsidy for farmers in Poland as at 2016 was 50%. The premium subsidy and other strategy such as the imposition of insurance tariff for non-insurance registration of farm lands have increased the total number of insurance policies in the country.
In spite of the noted challenges, total agricultural insurance premiums at the global level have witnessed steady increases in recent periods. Available statistics shared by Čolović and Petrović (2014) indicated total agricultural insurance premiums accumulated in 2014 amounted to $31 billion. This was about four times the amount ($8 billion) recorded nine years earlier during 2005. The growth recorded in agricultural insurance premiums between 2005 and 2011 was about 20%. However, the penetration rate during the same period was negative 0.83%.
The United States of America and Canada recorded the highest increase (55%) in agricultural insurance premiums during the period under review. The respective increase recorded by Asia and Europe during the period were 22% and 18%. The rate of agricultural insurance premium accumulation in emerging economies was progressive and somewhat encouraging. For instance, total agricultural insurance premiums recorded in emerging economies increased from $1 billion during 2005 to $5 billion during 2011; and projected to surge to $19 billion by 2025. About 90% of all signed policies related to crop insurance; and the remaining 10% included signings for other forms of agricultural insurance (Čolović and Petrović, 2014).
Investment and Innovation within the Manufacturing Industry
A study conducted by Danmola, Olateju and Aminu (2017) sought to assess the effect of foreign direct investment (FDI) on the performance of the manufacturing sub-sector within the Nigerian economy. The research outcomes showed a statistically significant relationship between foreign direct investment and output of firms in the manufacturing sub-sector. The outcomes affirmed the effectiveness of federal government of Nigeria’s economic policy which lays strong emphasis on trade and industrial liberalisation. Nigeria’s economic policy focuses on improvements in efficiency and productivity; and competitiveness of companies in the manufacturing industry.
Danmola et al. (2017) identified positive domestic investment as a major driver for increasing flow of foreign direct and indirect investments into the manufacturing sub-sector. To assure devolution of economic resources and increased performance of the manufacturing sub-sector, the authors suggested the need for significant proportion of foreign direct investment to be channelled into the manufacturing sub-sector. Finally, the implementation of trade liberalisation policy should proceed with caution, so Nigeria does not become an import-led economy.
Obamuyi, Edun and Kayode (2012) evaluated the impact of lending by banking institutions, capacity utilisation by manufacturing companies; and economic growth on manufacturing output within the Nigerian economy. Times series data covering a period of thirty-six (36) years spanning from 1973 through 2009 were used in the study. The research data were analysed using the cointegration and vector error correction model (VECM). The study outcomes showed no significant relationship between economic growth and manufacturing output.
This outcome somewhat corroborated Olawumi and Ogungbenle (2018) who found a negative relationship between the coefficient of operating efficiency and growth of companies within the Nigerian manufacturing sub-sector. However, a positive relationship between manufacturing output; and banking institutions’ lending rates and manufacturing capacity utilisation was established. Obamuyi et al. (2012) called for a concerted effort by financial institutions, manufacturers, government; and other key stakeholders to review and improve on existing lending and growth policies to render the Nigerian economy attractive to local and foreign investors.
Hassanzadeh and Cheng (2016) presented comprehensive and critical review on the selection of suppliers by manufacturers. They presented comprehensive review on how manufacturers could develop and formulate different criteria to select suppliers; and how manufacturers could apply and implement selection algorithms and multi-objective decision makings. The researchers presented in-depth analysis of the following individual and integrated suppliers’ selection approaches to facilitate decision makings by manufacturers: analytic network process (ANP), integer programming (IP), goal programming (GP), analytic hierarchy process (AHP), linear programming (LP), data envelopment analysis (DEA), and mathematical programming (MP).
Hassanzadeh and Cheng (2016) noted consistent increase in manufacturing firms’ decision to engage the services of other competent firms in the industry; and to outsource part of their manufacturing processes and business to suppliers across the globe. This strategy is carefully adapted to ensure significant reduction in operating costs, improvements in the quality of final products; expanding existing markets and exploring new ones; and offering better customer services. These variables leave manufacturing firms across the globe with novel challenges.
However, the foregoing are essential prerequisites for firms to have competitive edge in the manufacturing industry both at the local and international levels. Evaluation and critical analysis of the strengths and weaknesses of existing and potential suppliers could contribute immensely to the survival of firms in the ever-changing global business environment. Thus, critical evaluation and selection of suppliers should constitute an integral part of manufacturers’ strategies.
Contreras and Perez (2018) were interested in knowing the implications of internet of things (IoT) usage for productivity increase in the manufacturing sub-sector with special emphasis on data privacy and security. The researchers argued, the research objective was relevant because the gradual and significant influence of the internet of things in different contexts, including businesses is very high. The study involved literary analysis of ninety-one (91) papers focused on how to increase productivity in a business through the use of internet of things; and presented in thirty-one (31) different journals in various countries across the globe: Netherlands, Spain, England, China, and Switzerland.
Contreras and Perez (2018) made suggestions on how cyber security, supply chain, large data, digital manufacturing, monitoring and control systems could be integrated strategically into the implementation of internet of things to ensure productivity increase in the manufacturing sub-sector of economies across the globe.
Mose, Njihia and Magutu’s (2013) study was focused on the examination of major factors affecting the success of large manufacturing companies in electronic procurement (e-procurement); and the challenges inherent therein. Mose et al. (2013) sought to establish the extent of adoption of e-procurement among large scale manufacturing companies; identify the underlying factors for the success of e-procurement among large companies; and to determine challenges saddled with large manufacturing companies in the adaption and implementation of e-procurement in Nairobi, Kenya. Cross-sectional survey and descriptive statistical model were adapted and used in the research. Questionnaires were administered to and gathered from forty-six (46) respondents selected from four hundred and fifty-five (455) large scale manufacturing companies in Nairobi, Kenya.
Findings from the research revealed widespread adoption and implementation of e-procurement among large scale manufacturing companies. Specifically, the manufacturing companies were found to use e-procurement to advertise tenders online, receive tender proposals submitted online; and to shortlist suppliers online, among other important functions. Some factors identified as essential to the success story of e-procurement among large scale manufacturing companies included effective monitoring of established e-procurement systems; commitment of management and employees to the implementation process; acceptance of e-procurement among users; support from top management; and dependable supplier performance and information technology.
Conversely, the following factors were found to be inimical to successful implementation of e-procurement systems among large scale manufacturing companies: employees’ resistance to change; boards’ refusal to approve e-procurement systems implementation; lack of management support; and overreliance on outdated computer equipment. To ensure the success of e-procurement in the medium- and long-term, Mose et al. suggested the need for managements of large scale manufacturing firms to encourage employees to embrace the concept of e-procurement systems; and the urgent need to integrate e-procurement into their manufacturing systems.
Olawumi and Ogungbenle (2018) employed the dynamic panel data analysis tool to examine variables that affect growth of output in the activities of firms in the formal manufacturing sub-sector within the Nigerian economy. The authors noted the conduct of their research was necessitated by consistent dwindling output and ineffectiveness in the performance of the manufacturing sub-sector despite various attempts and measures by government to revamp it. Data required for the study were obtained from fifty (50) formal manufacturing companies listed on the Nigerian Stock Exchange (NSE); and documented in the NSE’s Fact Book and the Statistical Bulletin (2014) of the Central Bank of Nigeria. Estimates applied to the models in the research were adapted from the work of Sangosanya (as cited in Olawumi and Ogungbenle, 2018).
Outputs from the statistical analysis showed a negative relationship between the coefficient of operating efficiency and growth of companies in the manufacturing sub-sector. The implication is available figures on the growth of firms in the manufacturing sub-sector was at variance with their performance. Olawumi and Ogungbenle (2018) believed the output was indicative of regulatory and supervision weaknesses on the part of government agencies responsible for the manufacturing sub-sector. Findings from the study revealed significant positive relationship between variables such as managerial efficiency, exchange rate and bank efficiency; and growth of firms’ output in the manufacturing sub-sector of the Nigerian economy.
However, the impact of variables such as government regulations and policy, financial development, and energy infrastructural facilities on growth of output of firms in the manufacturing sub-sector was found to be negative. Based on the research findings, the researchers suggested the need for the Nigerian government to discourage actors in the formal manufacturing sub-sector from publishing reports that are not representative of the sub-sector’s actual performance. Further, government should introduce and implement policies that would increase the prices of imported goods; and institute measures that would reduce and prioritise the cost of borrowing from financial institutions to boost domestic or local production.
An empirical research conducted by Nyachanchu, Chepkwony and Bonuke (2017) sought to evaluate the impact of the three (3) dimensions of dynamic capabilities, namely reconfiguration, sensing, and seizing capabilities on the performance of companies operating in the manufacturing sub-sector in Nairobi County, Kenya. Structured questionnaire was administered to three hundred and sixty-nine (369) companies sampled from a population of one thousand, four hundred and ninety-six (1,496) manufacturing companies incorporated and operating in the study area. Two hundred and seventy-one (271) of the sampled questionnaire were retrieved and used in the research. Key respondents used in the study were chief executive officers (CEOs).
Regression analysis conducted by Nyachanchu et al. (2017) revealed, collectively, dynamic capabilities account for about 25.9% of variation in the performance of manufacturing companies in Kenya. However, each of the three dimensions (reconfiguration: B=0.182, p<0.001; sensing: B=0.215, p<0.01; and seizing: B=0.194, p<0.01) showed significant relationship with the performance of manufacturing firms.
Meghabber (2015) investigated the contribution of the electronic constraint (e-constraint) method and target costing to costs reduction in the modern manufacturing environment within the Algerian economy. Meghabber (2015) shared, the contemporary manufacturing environment is characterised by increased global competition; and rapid development of information and manufacturing technology. Therefore, it was imperative to assess the role of e-constraint and target costing in the competitiveness and survival of manufacturing firms in the global business environment.
The outcomes revealed manufacturing firms that adapt and implement the e-constraint method and target costing enjoy considerable reduction in operating costs. The analytical outcomes inferred Meghabber’s (2015) study could be replicated in other jurisdictions to affirm the economic usefulness and generalisability of the e-constraint method and target costing to manufacturing firms across the globe.
Osei, Yunfei, Appienti and Forkuoh (2016) examined the role of process innovation in the development of unique growth strategy for small and medium-sized enterprises (SMEs) in the Ashanti Region of Ghana. The unit of analysis was the shoe manufacturing industry in the research area. The process innovation concept was analysed using the three major perspectives developed by Oslo Manuel (as cited in Osei et al., 2016) including new and improved distribution, new process; and improved process. Purposively sampled data from the field were analysed using the Structural Equation Model. This helped in deriving path estimates to measure the relationship between the research variables.
Findings from Osei et al. revealed a positive relationship between a manufacturing firm’s decision to adapt new and improved distribution strategy and growth of small and medium-sized manufacturing firms. Further, the results showed significant reduction in operating costs and increase in customer satisfaction. Firms in the manufacturing industry adapt improved process strategy when they experience increased productivity through significant improvements in quality and quantity of outputs. However, this strategy does not result in significant reduction in costs of production; the increased production costs negatively impact on growth potentials of manufacturing firms. Osei et al. concluded, the impact of process innovation on performance of the shoe manufacturing industry is positive, but not absolute. Therefore, firms in the industry must exercise caution in its adaption and implementation.
Novel Strategies for Competitive Edge
Syduzzaman, Rahman, Islam, Habib and Ahmed (2014) evaluated the impact of total quality management (TQM) model on performance of the garments industry in Bangladesh. Syduzzaman et al. (2014) noted the advent of international trade liberalisation policies has brought in its wake increased competition; and the latter has obliged companies in the garment industry to identify and adapt new strategic approaches to production; and to the international markets. Syduzzaman et al. employed various tools such as check sheet, histogram, control chart, cause and effect diagram; and the Pareto chart to examine the effect of total quality management on the performance of various companies in the garments industry.
The study revealed an application of the total quality approach results in significant reduction in the scrape per style and number of rework recorded on a monthly basis. The researchers found the application of TQM in the garments industry was gaining prominence because consumer preferences and expectations were strongly considered.
Iqbal, Ali, Haque and Moin (2018) analysed and identified variations in the performance of sewing workers in the apparel industry attributable to assigned working hours during the day; and different working days. The researchers sought to identify possible ways to address the phenomenon. Data collected were analysed to measure variations in the work station, working hours; and working days. The two-way analysis of variance (ANOVA) statistical model was applied to the research.
Findings emanating from Iqbal et al.’s (2018) study revealed 70% variations occurred in the work station while variations in working hours were 53%. The Delphi technique was adapted by the researchers and a group of experts for analysis and identification; and to find solutions to the variations. Following the analysis, short- and long-term solutions were proffered.
Akewushola and Elegbede’s (2013) research sought to examine and identify obvious relationship between outsourcing strategy and performance of companies in the manufacturing sub-sector of the Nigerian economy. The researchers argued, intense competition among manufacturing companies and others have compelled them to identify novel strategies that would provide competitive edge. Moreover, manufacturing companies are constantly looking for strategic ways to assure value-for-money through efficient utilisation of limited financial, human capital; and other resources at their disposal.
Stratified sampling technique was used to select one hundred and twenty (120) respondents for the study. Interviews were conducted to elicit further information on the key research variables. Validity and reliability of the research instrument (questionnaire) was tested by the researchers. Data gathered from the field were analysed using the regression statistical model.
Outputs from the statistical analysis revealed considerable benefits associated with the outsourcing strategy. These included reduction in the number of staff, reduction in average production costs, improvement in quality service delivery, streamlining of production process, increase in sales turnover and profitability, reduction in administrative burden; and time savings for other activities, among others. To ensure compliance with best practices in outsourcing, the researchers suggested the need for constant monitoring of outsourced contractors.
An empirical research conducted by Al Hasan and Al-Zu’bi (2014) sought to investigate the relationship between lean manufacturing dimensions such as employees’ involvement, lean job characteristics, continuous improvement and waste minimisation; and radical product innovation in the pharmaceutical sub-sector within the Jordanian economy. In all, one hundred and sixty-four (164) questionnaires were administered to and collected from ten (10) pharmaceutical manufacturers in Jordan. The research independent and dependent variables were examined using the multiple regression analytical model.
The research findings revealed statistically significant relationship between employees’ involvement and lean job characteristics (independent variables); and radical product innovation (dependent variable). The study outcomes revealed statistically less significant effect on the relationship between waste minimisation and continuous improvement (independent variables); and radical product innovation (dependent variable). However, the analysis indicated employees’ involvement has the most significant effect on radical product innovation. On the basis of the findings, the researchers recommended, among other measures, increased employees’ involvement in decision making related to the process of production to enhance their capacity to be innovative.
Bhangale and Mahalle (2013) argued, the adaption and implementation of separate traditional manufacturing systems such as flow lines and job shops are too simplistic to assure the survival of manufacturing firms in the competitive global manufacturing business environment. Manufacturers in the automobile industry are responding to variations in demand and multiple features as unique ways of improving on production quality to ensure their competitiveness in the industry. Due to challenges associated with operations and space, manufacturing companies had begun to recognise and accept cellular layout as a possible solution to the manufacturing challenges.
Bhangale and Mahalle (2013) noted widespread acceptability of cellular manufacturing system as a promising alternative to the traditional manufacturing systems. The cellular manufacturing system combines high production rate of flow lines with flexible job shops to meet the design and demand needs of customers in the contemporary manufacturing business environment. The design and implementation of cellular manufacturing systems for real-life situations are challenging. However, the benefits thereof outweigh the challenges when the systems are finally designed and implemented. Validity of models used in deriving solutions for manufacturing challenges under the traditional methods and systems deteriorates over time owing to the models’ simplistic assumptions.
The foregoing notwithstanding, Bhangale and Mahalle (2013) believed an integration of the following simple assumptions would inform effective implementation of the cellular manufacturing systems; and affirm its ability to provide the needed solutions for the manufacturing sub-sector: first, product demand and product mix should remain fixed over a considerable period of time, usually over the production planning period; and second, each manufacturing task should be performed by a single machine type. That is, the possibility of routing flexibility of parts is not considered in the production process. The authors believed cellular manufacturing systems could employ flexibility in routing; and assume stochastic and dynamic requirements to address challenges inherent in manufacturing.
Garbelli (2014) observed flexible use of time and space by companies in the manufacturing industry to ensure they take and occupy the “best” manufacturing location or locations in their respective countries of operation; and across the globe. This implies firms in the manufacturing industry are constantly searching for solutions; they are constantly looking for innovative ways to effectively combine spatial requirements and time for manufacturing activities to assure strategic location of their manufacturing units across the globe.
The author averred, a competitive network is often created when two or more companies pool resources together to cede individual absolute control over certain business processes to enjoy mutual advantage; and to ensure maximum use of benefits derived from their union. Competitive networks often stress intense and many relationships among member companies ranging from outsourcing strategies to downsizing of internal skills to ensure cost-efficiency; and implementation of competitive relationship with key stakeholders such as distributors, suppliers and other competitors in the industry. Competitive network systems result in the creation of inter-firm business unit. This unit reflects shared activities of the combined firms.
The above write-up was extracted from an earlier publication on “Role of Agribusiness in the Development of Robust Manufacturing Sub-Sector” by Ashley and Gyekye (2021) in the International Journal of Business and Management.
The writer is a Chartered Economist/Business Consultant.